Choosing a mortgage

A mortgage is definitely the most common tool for investing in real estate (as I always say, it is not the only one … you always have to be creative with your financing options).
You have perhaps been led to believe that there is a “mortgage market” and that essentially one is like the other.

And maybe, in the bank where you have a current account and you are well known, they will treat you well. This article show that this is not alway the case.

Using your own bank: it is simple, but not very effective
It ‘s true that your bank knows you and you feel at ease in asking for a loan. But there is no guarantee that this is the bank that will treat you the best.

My recommendation is to ask your own bank and then go to other banks to make a comparison.

Broker: The investor’s secret weapon in property

When you start, you need to get a mortgage on as favorable terms as possible. Brokers do a good job in this process: they act as an interface between those seeking mortgages and those who give them. They have a personal interest in doing so because they are earning a commission and so they are on your side.

With a broker you can get things done more quickly and with less work than going directly to the bank. Clearly you have to pay for the service, but if you are an investor that’s part of the business expenses.

There are online sites where you can request a loan according to your income level and the value of the property and you can compare the different banks to choose the best offers.

And now you know where to look, how do you choose?
In the selection decision, it is necessary to keep some basic elements in mind:

● Penalties for prepayment;
● Brokerage costs;
● Limit on loan/price ratio: most mortgages finance 70-80% of the value of the property, in some cases you can get more;
● Ratio of mortgage amount to income level;
● Rates: fixed or variable.

The discussion on rates (fixed, variable, etc.) I will cover in a new article.
Here I wanted to make you understand that the investor does not behave in the selection of the mortgage like a regular home buyer does.

An investor has to compare and choose the best conditions remembering that they will not be paying the bank for 20 or 30 years, because they will want to turn over their investment in a few months.